In re Volkswagen "clean Diesel" Mktg.

• Decision Date: 25 October 2016
• Docket Number: MDL No. 2672 CRB (JSC)
• Court: U.S. District Court — Northern District of California
• Parties: IN RE: VOLKSWAGEN "CLEAN DIESEL" MARKETING, SALES PRACTICES, AND PRODUCTS LIABILITY LITIGATION This Order Relates To: ALL ACTIONS (except the securities action)

IN RE: VOLKSWAGEN "CLEAN DIESEL" MARKETING, SALES PRACTICES,

AND PRODUCTS LIABILITY LITIGATION

This Order Relates To: ALL ACTIONS (except the securities action)

MDL No. 2672 CRB (JSC)

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

October 25, 2016

ORDER GRANTING FINAL APPROVAL OF THE 2.0-LITER TDI CONSUMER AND RESELLER DEALERSHIP CLASS ACTION SETTLEMENT

Just over one year ago, Volkswagen publicly admitted it had secretly and deliberately installed a defeat device—software designed to cheat emissions tests and deceive federal and state regulators—in nearly 500,000 Volkswagen- and Audi-branded TDI diesel vehicles sold to American consumers. Litigation quickly ensued, and hundreds of consumers' lawsuits were assigned to this Court as a multidistrict litigation ("MDL").

After five months of intensive negotiations conducted under the guidance of a Court-appointed Settlement Master, Plaintiffs and Defendants Volkswagen AG, Audi AG, and Volkswagen Group of America, Inc. (collectively, "Volkswagen") reached a settlement that resolves consumer claims concerning the 2.0-liter TDI diesel vehicles. The Court preliminarily approved the Amended Consumer Class Action Settlement Agreement ("Settlement") on July 26, 2016 (Dkt. No. 1688) and entered its Amended Order on July 29, 2016 (Dkt. No. 1698). The Settlement Class Representatives now move the Court to finally approve the Settlement. (Dkt. No. 1784.) On October 18, 2016, the Court held a fairness hearing regarding final approval, during which 18 Class Members or attorneys for Class Members addressed the Court. Having considered the parties' submissions and with the benefit of oral argument, the Court GRANTS final approval of the Settlement Agreement. The Settlement is fair, reasonable, and adequate.

I. BACKGROUND

A. Factual Background

Over the course of six years, Volkswagen sold nearly 500,000 Volkswagen- and Audi-branded TDI "clean diesel" vehicles, which they marketed as being environmentally friendly, fuel efficient, and high performing. Consumers were unaware, however, that Volkswagen had secretly equipped these vehicles with a defeat device that allowed Volkswagen to evade United States Environmental Protection Agency ("EPA") and California Air Resources Board ("CARB") emissions test procedures. Specifically, the defeat device produces regulation-compliant results when it senses the vehicle is undergoing testing, but operates a less effective emissions control system when the vehicle is driven under normal circumstances. It was only by using the defeat device that Volkswagen was able to obtain Certificates of Conformity from EPA and Executive Orders from CARB for its TDI diesel engine vehicles. In reality, these vehicles emit nitrogen oxides ("NOx") at a factor of up to 40 times over the permitted limit.

B. Procedural History

On September 3, 2015, Volkswagen admitted to EPA and CARB that it had installed defeat devices on its model years 2009 through 2015 Volkswagen and Audi 2.0-liter diesel engine vehicles. The public learned of this admission on September 18, 2015, when the EPA issued a Notice of Violation ("NOV") that alleged Volkswagen's use of the defeat device violated provisions of the Clean Air Act, 42 U.S.C. § 7401 et seq. That same day, CARB sent Volkswagen a notification letter stating CARB had commenced an enforcement investigation concerning the defeat device.

Two months later, EPA issued a second NOV to Volkswagen, as well as Dr. Ing. h.c. F. Porsche AG ("Porsche AG") and Porsche Cars North America, Inc. ("PCNA"), which alleged Volkswagen had installed in its 3.0-liter diesel engine vehicles a defeat device similar to the one described in the September 18 NOV. CARB also sent a second letter concerning the same matter.

1. Consumer Actions

Consumers nationwide filed hundreds of lawsuits after Volkswagen's use of the defeat device became public, and on December 8, 2015, the Judicial Panel on Multidistrict Litigation("JPML") transferred 56 related actions, including numerous putative class actions, to this Court for coordinated pretrial proceedings in the above-captioned MDL. (Dkt. No. 1.) The JPML has since transferred an additional 1,101 tag-along actions to the Court. (Dkt. No. 2092.)

In January 2016, the Court appointed Elizabeth J. Cabraser of Lieff, Cabraser, Heimann & Bernstein, LLP as Lead Plaintiffs' Counsel and Chair of the Plaintiffs' Steering Committee ("PSC"), to which the Court also named 21 attorneys. (Dkt. No. 1084.) On February 22, 2016, the PSC filed its Consolidated Consumer Class Action Complaint against 13 Defendants: VWGoA; VWAG; Audi AG; Audi of America, LLC; Porsche AG; PCNA; Martin Winterkorn; Mattias Müller; Michael Horn; Rupert Stadler; Robert Bosch GmbH ("Bosch GmbH"); Robert Bosch, LLC ("Bosch LLC"); and Volkmar Denner. (Dkt. No. 1230.) The Consolidated Complaint asserted claims under (1) the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(c)-(d), and the Magnusson-Moss Warranty Act, 15 U.S.C. § 2301 et seq.; (2) state fraud, breach of contract, and unjust enrichment laws; and (3) all fifty States' consumer protection laws. (Id. ¶¶ 361-3432.) The PSC also filed a Consolidated Amended Reseller Dealership Class Action Complaint against the same 13 Defendants, which asserted RICO, fraud, failure to recall/retrofit, and unjust enrichment claims. (Dkt. No. 1231 ¶¶ 179-292.) The PSC subsequently filed an Amended Consolidated Consumer Class Action Complaint ("Amended Consumer Complaint," Dkt. No. 1804) and a Second Amended Consolidated Reseller Dealership Class Action Complaint ("Second Amended Reseller Complaint," Dkt. No. 1805).

2. Government Actions

This MDL also includes actions brought by federal and state government entities. The United States Department of Justice ("United States") on behalf of EPA has sued VWAG, Audi AG, VWGoA; Volkswagen Group of America Chattanooga Operations, LLC ("VW Chattanooga"), Porsche AG, and PCNA for claims arising under Sections 204 and 205 of the Clean Air Act, 42 U.S.C. §§ 7523 and 7524. The Federal Trade Commission ("FTC") has also brought an action against VWGoA. The FTC brings its claims pursuant to Section 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §53(b), and alleges violations of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). Additionally, the State of California, on behalf of thePeople and CARB, has sued VWAG, VWGoA, VW Chattanooga, Audi AG, Porsche AG, and PCNA for violations of the Consumer Financial Protection Act, 12 U.S.C. § 5536, and various California state laws.

3. Settlement Negotiations

In January 2016 the Court appointed former Director of the Federal Bureau of Investigation Robert S. Mueller III as Settlement Master to oversee settlement negotiations between the parties. (Dkt. No. 973.) Settlement talks began almost immediately, and by April 2016, the parties reached agreements in principle regarding 2.0-liter diesel engine vehicles. (Dkt. No. 1439 at 4:25-6:15.) On June 28, 2016, the United States, the PSC, and the FTC filed a Partial Consent Decree, proposed Consumer Class Action Settlement Agreement, and Partial Consent Order, respectively. (Dkt. Nos. 1605-07.) Additionally, on July 7, 2016, the State of California filed a Partial Consent Decree resolving claims brought on behalf of the People. (Dkt. No. 1642.) The PSC and the United States subsequently filed an Amended Settlement and an Amended Partial Consent Decree. (See Dkt. Nos. 1685, 1973-1.) Negotiations concerning the 3.0-liter diesel engine vehicles remain ongoing.

4. Approval of Settlements

The Court granted preliminary approval of the Settlement on July 26, 2016. Thereafter, the Court entered the State of California's consent decree on September 1, 2016 (Dkt. No. 1801).

In accordance with the Court's Order Granting Preliminary Approval, Plaintiffs filed a statement regarding their prospective request for attorneys' fees and costs on August 10, 2016 and a motion for final approval on August 26, 2016. (Dkt. Nos. 1730, 1784.) The Notice Administrator implemented the Court-approved Notice Program on July 28, 2016 by sending email notice to potential Class Members, and on August 10, 2016, the Notice Administrator mailed Notice of the proposed Settlement Agreement to the putative Class via first class U.S. Mail. (Dkt. No. 1978 ¶¶ 10, 12; Dkt. No. 1979 ¶¶ 8, 13.) By September 30, 2016, there were 462 timely objections and 3,298 exclusions. (Dkt. No. 1976 at 3-4; Dkt. No. 1976-2 ¶ 6.)

II. SETTLEMENT TERMS¹

The key provisions of the Settlement are as follows. The Settlement Class is defined as

all persons (including individuals and entities) who, on September 18, 2015, were registered owners or lessees of, or, in the case of Non-Volkswagen Dealers, held title to or held by bill of sale dated on or before September 18, 2015, a Volkswagen or Audi 2.0-liter TDI vehicle in the United States or its territories (an "Eligible Vehicle"), or who, between September 18, 2015, and the end of the Claim Period, become a registered owner of, or, in the case of Non-Volkswagen Dealers, hold title to or hold by bill of sale dated after September 18, 2015, but before the end of the Claims Period, an Eligible Vehicle in the United States or its territories.

(Dkt. No. 1685 ¶ 2.6.) Eligible Vehicles are

Model Year 2009 through 2015 Volkswagen and Audi light-duty vehicles equipped with 2.0-liter TDI engines that (1) are covered, or purported to be covered, by the EPA Test Groups in the table [in paragraph 2.33]; (2) are, at any point during the period September 18, 2015 to June 28, 2016, registered with a state Department of Motor Vehicles or equivalent agency or owned by a Non-Volkswagen Dealer in the United States or its territories that (a) holds title to the vehicle or (b) holds the vehicle by bill of sale; (3) for an Eligible Owner, are currently Operable or cease to be Operable only after the Opt-Out Deadline; and (4) have not been modified pursuant to an Approved Emissions

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